Most of us when we were children, we were bought wooden or metal hollow cubes with little slits above them by our parents. We were told that everyday we can save 25 frs or 50 frs and then at the end of the year, we break open the bank to reveal all we had collected.
It is how most of us learned how to save money. As we were eager to open the bank at the end of the year, the hole on the top was usually designed to be very tiny such that trying to remove money from it without breaking it will be quite the hassle.
It was good even though some us developed the skill to remove the money using tail combs and crocheting pins😂. Though we were saving money, do you know that we were actually practicing hoarding? Yes we were.
Hoarding in finance refers to the situation where you accumulate money in a way that it is no longer flowing in the economy. Now, how does this affect us?
Effect of hoarding
When you keep money in that your small bag or safe in the house, the money stays with you. But that is not things are supposed to be. Money was designed to always move from one person to another. This phenomenon is known as the cash flow.
Cash flow is supposed to be balanced. That is it should not be too high or too low. When so many people practice hoarding, money keeps leaving the flow. This reduces the amount of money that is in the economy and cash flow decreases.
What now happens when there's little money in the economy? Inflation sets in. Prices of goods and services increase as money is now highly valued since it is scarce.
Like the situation in Cameroon now. One of the reasons why we are suffering from such high inflation and the increase of prices of food everyday is not only due to the crisis or electricity problems. It is because of hoarding. We hear incidents of Ministers and big government officials being caught hoarding billions of embezzled funds in their houses. Some of them thrown the money into water while others set them on fire.
Solution to hoarding
In order to solve this problem, financial institutions like banks, credit unions, njangi, and other financial bodies come into play. They allow you to save and accumulate your money while maintaining the cash flow in the economy.
So rather than use wooden banks, we can create savings accounts in any of these institutions and save our money there. The best part is that e even get paid interest just for keeping money.
In conclusion, we should try to avoid practicing hoarding as the effects can be felt by the entire economy when everyone engages in it or people engage in it in a large scale.
It should also be worth noting that certain countries consider hoarding as a crime punishable by law.
Thank you for reading.